Paclitaxel is a well known anticancer compound. Its biosynthesis involves the formation of a highly functionalized diterpenoid core skeleton (baccatin III) and the subsequent assembly of a phenylisoserinoyl side chain. Despite intensive investigation for half a century, the complete biosynthetic pathway of baccatin III remains unknown. In this work, we identified a bifunctional cytochrome P450 enzyme [taxane oxetanase 1 (TOT1)] in Taxus mairei that catalyzes an oxidative rearrangement in paclitaxel oxetane formation, which represents a previously unknown enzyme mechanism for oxetane ring formation. We created a screening strategy based on the taxusin biosynthesis pathway and uncovered the enzyme responsible for the taxane oxidation of the C9 position (T9αH1). Finally, we artificially reconstituted a biosynthetic pathway for the production of baccatin III in tobacco.